Repsol OKs $5 billion compensation deal with Argentina on YPF seizure

Repsol OKs $5 billion compensation deal with Argentina on YPF seizure

MADRID -- Repsol’s board has approved an agreement under which it will receive at least $5 billion for Argentina’s expropriation of its YPF unit, ending a two-year international dispute.

Argentina will issue as much as $6 billion in bonds that the Spanish oil company can sell or hold until maturity, according to a Repsol filing today to regulators. The debt won’t be satisfied until Repsol has received $5 billion, even if the bonds default, the company said after a board meeting today. The deal requires shareholder approval.

President Cristina Fernandez de Kirchner’s government seized 51% of YPF in April 2012 after saying Repsol hadn’t invested enough. Ending the dispute may help attract investors to the country to develop some of the world’s largest shale fields. The agreement, less than the $10.5 billion in compensation Repsol initially sought, marks the end of two years of wrangling over the unit, which remained on the company’s books at full value until last week.

On Feb. 21, Repsol took a $1.76 billion charge to reduce the value of the stake. The company removed the YPF suffix from its name in 2012, 13 years after acquiring the unit from the Argentine government and private shareholders at the peak of an economic boom under President Carlos Menem.

The deal took about three months to complete after an outline agreement was reached in November with the help of the Spanish government and officials from Petroleos Mexicanos, the Mexican state-owned oil company that is a Repsol shareholder and has expressed interest in developing Argentine shale fields.

Argentina holds the world’s second-largest reserves of shale gas and the fourth-largest of shale oil, according to U.S. Energy Information Administration data. The country is offering tax and export incentives to energy companies that invest at least $1 billion over a five-year period.